Economist: Spanish Default Would Send US Stocks Plunging 20%

A Spanish default, which is increasingly likely, will send U.S. stock markets falling as much as 20 percent, says economist Harry Dent, author of "The Great Crash Ahead."

Spain is officially in a recession, with the economy contracting 0.3 percent in the fourth quarter of 2011 and another 0.3 percent in the first quarter of this year.

The Standard & Poor's ratings agency downgraded the country recently as well as 16 as Spanish banks, while yields have been spiking in government bond auctions, as investors are growing increasingly nervous over the country's finances and are demanding more for their buck.

Still, despite such ongoing concerns, turnout at government bond auctions remains solid, but that will change.

"Spain is going to default. The markets are in total denial on this," Dent tells CNBC.

"It’s a question of whether it’s going to happen sooner or later."

Greece recently defaulted on its debts with private creditors although in an orderly and largely negotiated fashion, but Spain will be a messier affair.

"Spain has higher unemployment than Greece, higher total public and private debt than Greece," as well as a bigger housing bubble, a higher percentage of subprime mortgages, and the country has "one of the highest percentages of debt owed to foreigners," Dent says.

Spain is working to make its economy grow while sticking to debt-reducing austerity measures such as spending cuts and layoffs, which often slash into growth rates as a side effect.

Unemployment in Spain has hit a sky-high 24.4 percent, yet Spanish authorities insist pain today will lead to a more robust and streamlined economy tomorrow.

"The Spanish government does not see any incompatibility between austerity and economic growth," says Spanish Economy Minister Luis de Guindos, according to the AFP newswire.

"Budget discipline is unavoidable if we want to build solid foundations and sufficient financing for economic growth in our country — it is a necessary condition."